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Days after BASIC Bank board's decision not to merge with a private-sector counterpart, the National Bank PLC now opts to follow suit, sources say, in apparent renunciation of the hasty regulatory move.
The board of directors of the National Bank PLC in a meeting Saturday decided to retract the merger offer for now rather to take measures to improve the bank's financial health, a top executive of the bank said.
"Our newly appointed board and the management have decided not to go for merger now," the official told the FE Sunday.
The central bank in a meeting on April 9 had decided to merge National Bank with the United Commercial Bank (UCB). None from the National Bank was present at the meeting.
This happens to a second rebuff to the Bangladesh Bank's move on 'voluntary' merger of weak banks with healthy ones under a financial-sector reform recipe.
The board of directors of BASIC Bank, a state-owned specialised bank, on April 18 in a letter to the ministry of finance informed that they were not interested to merge with a privately-owned bank.
The Bangladesh Bank on April 8 in a meeting had decided that the BASIC Bank will merge with City Bank PLC. Also, none from BASIC Bank was present at the meeting. As the news spread fast, scores of institutional depositors and also individual account-holders of the bank rushed in to withdraw money from the ailing bank.
The NBL official said the bank got a new board of directors and a new managing director only three months back. They want to work vigorously to improve the financial health of the bank.
So they are not interested in implementing the central bank's decision now.
He said after the news of the bank's merger spread, the depositors rushed in to withdraw their money in fear of the consequences. Top management of the bank had to visit various branches to talk to the worried depositors and request them not to withdraw funds.
"The hurried withdrawal of money now has lessened, and if we don't merge, the tendency will totally stop," says the NBL official about their confidence regarding a bounceback.
Until now the central bank has mediated merger of five weak banks with five other comparatively strong banks. The first announcement came on March 14 when the boards of directors of EXIM Bank and Padma Bank decided to merge the two banks being prodded by the central bankers.
Later, the central bank in a meeting on April 3 decided that Bangladesh Development Bank Ltd will merge with Sonali Bank PLC and Rajshahi Krishi Unnayan Bank with Bangladesh Krishi Bank.
The central bank later said the move on mergers and acquisitions of more banks will remain suspended until the procedures for merger of already -announced banks are completed.
Questions have arisen whether the "hurried" and "forced" merger of banks will bring any good for the country's problem-ridden banking sector which is plagued with non -performing loans.
Former central bank governor Dr Salehuddin Ahmed told the FF Sunday any quick move on mergers and acquisitions would further destabilise the financial health of the banks, creating panic among the employees and depositors of the weak banks.
"This is a very complex issue. The forced merger is not a solution," he said.
"The Bangladesh Bank should have prepared the merger guidelines first and distributed among the banks to study and decide on their own instead of forcing any bank to go for merger," Mr Ahmed suggests.
Central bank spokesperson Md Mezbaul Haque told the FE Sunday that the move for merger of the banks is "totally voluntary" and the board of directors of the banks will take decision in this regard.
"The central bank has not decided which bank will merge with whom and it has no such authority," he said, in order to dispel scepticism.